Department for Levelling Up, Housing and Communities

Intergovernmental Relations Quarterly Report: Quarter 3 2022

Felicity Buchan: Today, the Government published the report of our engagement with the devolved governments in quarter three of 2022 on GOV.UK.The report covers a period where we have seen unprecedented events, and gives an insight into the extensive engagement between the UK Government, Scottish Government, Welsh Government, and Northern Ireland Executive between 1 July to 30 September 2022. During this reporting period the governments collaborated on a number of areas, not least in organising the commemoration of the sad passing of Her Majesty The Queen.The report is part of the Government’s ongoing commitment to transparency of intergovernmental relations to Parliament and the public. The Government will continue with publications to demonstrate transparency in intergovernmental relations.

Department for International Trade

Trade Update: Canada and Gulf Cooperation Council

Kemi Badenoch: The Department for International Trade (DIT) has made progress on two key trade negotiations. This statement provides Parliament with an update on the United Kingdom’s (UK) trade negotiations with Canada and the Gulf Cooperation Council (GCC). UK-Canada Trade Negotiations The fourth round of the UK-Canada Free Trade Agreement (FTA) negotiations commenced on 28 November and concluded on 2 December. The negotiations were hosted in Ottawa and conducted in a hybrid format with technical discussions held across 32 policy areas over 73 separate sessions. This round saw the first full chapter agreed in principle, Transparency, and we provisionally identified candidates for closure in the next rounds. We continued to make steady progress and agree text where there was clear alignment, including in Innovation, Small and Medium-sized Enterprises, Technical Barriers to Trade, Anti-Corruption and Financial Services. Discussions were largely constructive, but key differences remain and there is more work to be done towards acceptable landing zones in important areas such as Services, Investment and Procurement. Both negotiation teams took actions to consider each other’s priorities and identify opportunities to move closer together ahead of the next round. As always, we closely monitored the interdependencies between the bilateral and Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) negotiations, particularly considering CPTPP members were meeting in London the following week. We expect to hold the fifth round of negotiations in London in March 2023. UK-Gulf Cooperation Council Trade Negotiations The second round of negotiations for an FTA between the UK and the GCC took place between 5 and 9 December. The second round was hosted in London and held in a hybrid fashion. More than 100 GCC officials travelled to London for in-person discussions, with others attending virtually. Technical discussions were held across 29 policy areas over 36 sessions. In total, more than 100 UK negotiators from across Government took part in this round of negotiations. During the round, the UK set out its policy positions having exchanged draft chapter text with the GCC across most policy areas before the round. A key objective at this stage was to continue to build a firm understanding of the GCC’s policy positions and priorities. Both negotiation teams took actions to further consider each other’s positions and identify opportunities to move closer together ahead of round three. Both sides remain committed to securing an ambitious, comprehensive and modern agreement fit for the 21st century. An FTA will be a substantial economic opportunity, and a significant moment in the UK-GCC relationship. Government analysis shows that, in the long-run, a deal with the GCC is expected to increase trade by at least 16%, add at least £1.6 billion a year to the UK economy and contribute an additional £600 million or more to UK workers’ annual wages. We expect the third round of negotiations to take place in Riyadh next year. His Majesty’s Government remains clear that any deal we sign will be in the best interests of the British people and the United Kingdom economy. We will not compromise on our high environmental, public health, animal welfare and food standards, and we will maintain our right to regulate in the public interest. We are also clear that during these negotiations, the National Health Service and the services it provides is not on the table. His Majesty’s Government will keep Parliament updated as these negotiations progress.

Department for Environment, Food and Rural Affairs

Conclusion of annual negotiations for 2023 fishing opportunities

Mark Spencer: Each year, the UK negotiates with the EU, Norway, other coastal States in the Northeast Atlantic and via Regional Fisheries Management Organisations (RFMOs) to agree catch opportunities and sustainable management measures for shared stocks, including in international waters.Successful annual negotiations for 2023 fishing opportunitiesThe UK has now concluded these negotiations and reached agreement with the EU, Norway and other coastal States in the North-East Atlantic on catch opportunities for 2023. Across these negotiations, the UK has secured agreement on 86 Total Allowable Catches (TACs), providing £750 million of potential fishing opportunities. The UK has also concluded an agreement with Norway for continued access to each other’s waters for 2023, as well an exchange of fishing quota. The UK Government has worked closely with the Scottish Government, Welsh Government and Northern Ireland Executive, and the outcomes secured will enable us to improve the sustainable management of our fish stocks and support the whole of the UK fishing industry. UK-EU AgreementAs a result of quota share uplifts agreed in the Trade and Cooperation Agreement, the UK has around 30,000 tonnes more quota from these negotiations than it would have received with its previous shares as an EU Member State. The UK has agreed 69 TACs and arrangements for non-quota stocks with the EU for 2023, providing fishing opportunities of more than 140,000 tonnes. In total, this is worth around £282 million, based on historic landing prices. An initial estimate suggests the number of TACs that align with scientific advice from the International Council for the Exploration of the Sea (ICES) has increased by 13% compared to last year. This is the largest increase since 2020 when the UK first started using this metric. The Government will publish shortly a full assessment of the number of TACs set consistent with ICES advice across all annual negotiations. For 2023, we have also agreed access arrangements on albacore tuna and spurdog in the North Sea for the first time through the UK-EU written record. For non-quota stocks (NQS), we agreed a roll-over of access arrangements for 2023 to ensure continued access for the UK fleet to fish NQS worth around £25 million per year in EU waters. This is alongside further flexibility for seabass management measures within the ICES advice. UK-EU-Norway Trilateral Negotiations The UK has also reached agreement with Norway and the EU on catch limits for 2023 for six stocks, worth over £202 million to the UK fishing industry in the North Sea and a further £11 million in other waters around the UK, based on historic landing prices. The Parties have agreed increases in TACs for five of the six stocks, including North Sea cod. They have agreed to a cut in North Sea Herring. All TACs are at or below the level advised by ICES. For two stocks (haddock and whiting), the Parties have agreed to take a more precautionary approach than the scientific advice to avoid risks to the recovery of North Sea cod given the close interactions between the stocks, and set a 30% increase on each. The Parties renewed their commitment to deliver Long Term Management Plans for their shared stocks, and have agreed to develop new and more effective management measures for the North Sea herring fishery, focusing on stability for industry and sustainability. The Parties have also agreed to continue building on the work undertaken this year on Monitoring, Control and Surveillance of their shared stocks. UK-Norway Bilateral NegotiationsThe UK has agreed with Norway on continuing to allow vessels to access our respective waters for demersal fisheries, as well as exchanges of quota worth around £5 million to the UK fleet. UK vessels will be able to fish their North Sea whitefish quotas, such as hake and cod, in Norwegian waters, up to a total of 30,000 tonnes. We have also agreed to reciprocal access for herring, up to 20,000 tonnes. On exchanges, we secured around £3 million worth of North Sea quota from Norway (including valuable stocks such as monkfish), together with around £2 million worth of stocks in Arctic waters. This complements over 5,200 tonnes of cod in waters around Svalbard, worth an estimated £10 million, that Norway has allocated to the UK under a separate arrangement. The mutual access will also allow respective fleets more flexibility to target the stocks in the best condition throughout the fishing year, supporting a more sustainable and economically viable fishing industry. Multilateral ‘coastal State’ negotiations The UK has agreed TACs at the level advised by ICES on the three stocks we share with other coastal States in the North-East Atlantic: mackerel, blue whiting and atlanto-Scandian herring (ASH). The opportunities will be worth over £250 million to the UK fleet in 2023. The UK has also chaired negotiations throughout 2022 on a new quota-sharing arrangement for mackerel. These negotiations are making steady progress, and the UK remains committed to securing a fair, sustainable and comprehensive sharing arrangement. Negotiations will resume in early 2023, with an aim of concluding them by 31 March, alongside parallel discussions to agree new quota-sharing arrangements for blue whiting and ASH.

Prime Minister

Appointments to the UK Delegation to the Parliamentary Assembly of the Council of Europe

Rishi Sunak: The Hon. Member for Stoke-on-Trent Central (Jo Gideon) has been appointed as a full member of the United Kingdom Delegation to the Parliamentary Assembly of the Council of Europe in place of the Hon. Member for South West Hertfordshire (Gagan Mohindra). The Hon. Member for Hastings and Rye (Sally-Ann Hart) has been appointed as a full member in place of the Rt. Hon. Member for Gainsborough (Sir Edward Leigh), who has been appointed as a substitute member in place of the Hon. Member for Meriden (Saqib Bhatti). The Hon. Member for Morecambe and Lunesdale (David Morris) has been appointed as a full member in place of the Hon. Member for Sedgefield (Paul Howell). The Hon. Member for Hartlepool (Jill Mortimer) has been appointed as a full member in place of the Hon. Member for Broadland (Jerome Mayhew). The Hon. Member for Mid Derbyshire (Mrs Pauline Latham) has been appointed as a substitute member in place of the Hon. Member for Truro and Falmouth (Cherilyn Mackrory). The Hon. Member for South East Cornwall (Mrs Sheryll Murray) has been appointed as a substitute member in place of the Hon. Member for Bolsover (Mark Fletcher). The Hon. Member for West Worcestershire (Harriett Baldwin) has been appointed as a substitute member in place of the Hon. Member for North West Durham (Richard Holden). The Hon. Member for Cities of London and Westminster (Nickie Aiken) has been appointed as a substitute member in place of the Hon. Member for Beaconsfield (Joy Morrissey).

Treasury

Treasury Update

James Cartlidge: Along with resurgent demand for energy following the pandemic, Russia’s invasion of Ukraine and weaponisation of gas supplies has driven UK wholesale gas prices to record highs. Due to the composition and structure of the UK electricity market, higher wholesale gas prices are in turn driving higher wholesale electricity prices and leading to exceptional returns arising to some electricity generators in the UK. Consistent with action taken in other countries, from 1 January 2023 the government is introducing a temporary 45% tax on extraordinary returns made by some UK electricity generators. HM Treasury will today publish on GOV.UK draft legislation, along with an updated technical note explaining the policy in detail. The levy will be applied to a measure of extraordinary revenues, defined as revenues from selling periodic output at an average price above £75/MWh. That is approximately 1.5 times the average price of electricity over the last decade. It will apply to revenues from electricity generation in the UK from renewable (including biomass), nuclear, and energy from waste sources and will be focused on the largest generators through a generation threshold of 50GWH of annual output and a £10 million allowance. This temporary measure is not designed to penalise electricity generators. It is instead a response to the fact that, as a result of exceptional and unforeseen geopolitical events, some electricity generators are realising extraordinary returns from higher electricity prices – higher prices that have imposed substantial costs on households and business energy users and necessitated the government to take unprecedented action with £55 billion to directly help households and businesses with their energy bills. The government had previously considered a price cap in response to the current crisis. We have instead adopted this levy as a more proportionate approach. It leaves generators – whose continued investment in the industry is vital to our long-term energy security – with a share of the upside they receive at times of high wholesale prices. The levy will end on 31 March 2028. This reflects the possibility that wholesale electricity prices remain elevated for a number of years and the need for businesses to have certainty around the measures the UK is taking in response. However, should the crisis abate and prices fall below the benchmark price, the revenue forecast from the levy will not materialise and consideration would be given to the tax’s ongoing application.Furthermore, responding to concerns that have been raised around the tax’s duration and its impact on investment, the £75/MWh the benchmark price will be indexed to CPI inflation from April 2024, and relief will be provided for certain exceptional costs that are reducing the degree to which generators are benefitting from higher electricity prices. Support for investment in renewables The government is committed to decarbonising power systems by 2035 and reaching net zero emissions by 2050. Britain is a global leader in renewable energy. Last year, nearly 40% of our electricity came from offshore wind, solar and other renewables. Since 2010, our renewable energy production has grown faster than any other large country in Europe. We are committed to ensuring that the UK remains one of the best places in the world to invest in clean energy and have set stretching deployment ambitions, including up to 50GW of offshore wind by 2030 and a fivefold increase in solar by 2035. As we move towards these ambitious goals, the government will seize the opportunities for growth through the transition, creating the right framework to crowd-in billions of pounds of new investment into the UK’s economy. That includes: Our highly successful Contracts for Difference scheme continues to bring more and more generation online, with our most recent auction delivering a record capacity of almost 11GW. A consultation for the sixth Contracts for Difference round was published last week.The Offshore Coordination Support Scheme, which will provide up to £100m of grants to energy projects to develop coordinated options for offshore transmission infrastructure, was launched earlier this month.Government also continues to work with the Offshore Wind Acceleration Taskforce and other developers to identify and address barriers to deployment. This includes reforming the planning system, where government is acting to ensure that consents are secured faster, and the risk of delays are reduced.We have heard calls for the tax system to provide strengthened incentives for [long-term] investment in the low-carbon electricity generation sector, including investment in new capacity as well as investment needed to maintain and upgrade existing capacity. The government continues to recognise the value of capital allowances for supporting investment within a sustainable fiscal strategy, and any further changes will be set out at a future fiscal event in the usual way.Government is undertaking the Review of Electricity Market Arrangements (REMA) which will assess how our power markets can best deliver a low-cost, low-carbon and secure electricity system, whilst reducing our exposure to international oil and gas prices.

Contingent Liability Update

Andrew Griffith: Today I can inform the House that the Mortgage Guarantee Scheme will be extended by an additional year to continue to support homebuyers and movers with smaller deposits. The scheme will now close to new accounts on 31 December 2023.HM Treasury launched the Mortgage Guarantee Scheme in April 2021, which provides a guarantee to participating lenders across the UK who offer mortgages to first-time buyers and existing homeowners with a deposit as small as 5% on homes with a value of up to £600,000. Since its launch last year, the scheme has successfully restored the availability of 91-95% loan-to-value mortgage products, directly supporting over 24,000 households to buy their homes – 85% of which were by first-time buyers. Since 2010, more than 687,000 households have been helped into home ownership through government schemes.While the Mortgage Guarantee Scheme was originally planned to close to new mortgage applications on 31 December 2022, HM Treasury has decided to extend the scheme by an additional year to continue to provide lenders with the confidence to offer low deposit mortgages to consumers.Guarantees issued under the scheme are valid for up to seven years after the mortgage is originated. Participating lenders pay HM Treasury a fee for each mortgage entered into the scheme. This is set so that expected claims against the guarantee should be covered by revenue from the fee.In order to ensure products remain available, HM Treasury will therefore be extending the duration of the government’s contingent liability for an additional year beyond its planned closing date of 31 December 2022. The department is also reducing the maximum contingent liability cap from £3.9 billion to £3.2 billion, which remains set at a level so as not to constrain the ability of lenders to access the scheme. This liability would only materialise if the sum of commercial fees paid by lenders would not be sufficient to cover calls on the guarantee.Authority for any expenditure required under this liability will be sought through the normal procedure. HM Treasury has approved this proposal.